Former Xbox Game Studios (Microsoft) [2,015 articles]href =” https://www.videogameschronicle.com/companies/microsoft/ “> Microsoft exec Ed Fries has expressed concern about the potential impact of the company’s Game Pass subscription service on the gaming industry.
Speaking as part of a broader interview with the Xbox Expansion Pass, Fries – which was part of the original Xbox [5,087 articles]href =” https://www.videogameschronicle.com/platforms/xbox/ “> The Xbox launch team was asked before it left in 2004 – what it would do if it was still part of the Microsoft game team today.
Fries didn’t give an explicit answer but said he was “afraid” of the impact Game Pass could have, if it becomes as dominant a business model as Spotify in the music industry. He also made widespread claims about Spotify’s impact on the music industry, some of which experts disputed.
Xbox Game Pass launched in June 2017 and has become the center of Microsoft’s gaming business, giving members access to more than 100 titles for a monthly subscription fee.
As of January 2022, Game Pass has more than 25 million subscribers, according to Microsoft, so it still has a long way to go before it reaches the level of Spotify (182 million) and Netflix [156 articles]”href=”https://www.videogameschronicle.com/companies/netflix/”>Netflix (222 million). In fact, it was recently estimated that subscription services account for only 4% of annual gaming revenue in Europe and North America, Compared to 65% of global music revenue.
Xbox – May 2022 Games Gold
Both Microsoft and PlayStation said they don’t think subscriptions will ever be the dominant model in video games. However, former MS exec Fries encouraged platform holders to be “cautious” about the business models they create.
“The only thing they do that makes me nervous is Game Pass,” he said. “Game Pass scares me because there is something a bit similar called Spotify that was created for the music sector.
“When Spotify took off it destroyed the music business, it literally halved the annual revenue of the music business,” said a former Microsoft executive. “It worked so people don’t buy songs anymore.
“People don’t buy songs on their iPhone for example, so why do you? It’s all on your subscription service app. Apple Inc. [193 articles]href =” https://www.videogameschronicle.com/companies/apple/ “> Apple has said it will rule out buying songs because no one is buying them anymore.
“So we have to be careful that we’re not creating the same system in gaming. These markets are more fragile than people realize. I saw the games industry destroy itself in the early ’80s. I saw the educational software business destroy itself in the mid ’90s…They actually destroyed a multibillion dollar market in the early ’80s.” a few years.
“So Game Pass makes me nervous. As a customer, I love it. I love Spotify as a customer: I have all the songs I want… It’s a great deal as a customer. But it’s not necessarily great for the industry.”
Fries went on to ask if it’s possible for game developers to embrace subscription platforms as much as has been seen in the music space.
“At some point I flipped out and everything had to be [on Spotify]. The percentage of all the games in Game Pass is still minimal, and there are plenty of games out there. 200 games per week are shown on Steam [965 articles]”href =” https://www.videogameschronicle.com/platforms/pc/steam/ “> Steam and more coming to mobile.
Some of Fries’ claims about Spotify have been hotly disputed by music industry journalist Tim Ingham, editor of Music Business Worldwide, who told VGC that streaming’s impact on the music industry has been generally beneficial.
“Spotify didn’t cut the music business in half – piracy did,” he said. Spotify, and the cloud-based technology it relies on, has actually given music fans a more convenient, legal, and lucrative alternative to piracy.
Then, once consumers were comfortable with it, Spotify (and its competitors) performed another miracle: hundreds of millions of music consumers sold the subscription by monthly billing… despite the fact that the same free alternative, music piracy, is still available in any browser. !”
He added, “Arguably the music industry’s biggest problem with Spotify today is whether the free tier is still fit for purpose, because consumers have come to accept the paid subscription model. And make no mistake: subscription is a beloved model in the modern music world; it’s brought the entire industry back to the peak. The commercial that many thought Napster and William Wire had gotten rid of for good.”
Ingham cited figures from IFPI that show that since 2011 when Spotify launched in the US, the global recorded music industry has grown 73%, from $15 billion in annual revenue to $25.9 billion in 2021.
In response to Fries’ comments, Christopher Dring, head of games at ReedPop, acknowledged concerns about the impact subscription models could have if they leveled up to Spotify, but questioned whether they would.
“Currently, there are a lot of stories about how subscription services have been added to game creators. Not only were they a source of income in themselves, they immediately opened up games to millions of people.”
“There are many examples of games entering a spin-off on one console, and they are very popular, and that has caused normal $60 sales to skyrocket on other platforms.
“There are industry concerns about what might happen if subscriptions become dominant, as in music and television,” he added. “The subscription model doesn’t have to generate the revenue that AAA games need, especially single-player games that don’t have microtransactions… You can see why Sony Interactive Entertainment [2,217 articles]href =” https://www.videogameschronicle.com/companies/sony/ “> Sony is reluctant to release its latest releases on PS Plus.
“However, games are very different from music and television. These linear forms of entertainment are much shorter and more understandable. How many songs or TV shows do most people consume versus games?”
“If you’re someone who only plays two games a year – like FIFA and Call of Duty – how likely are you to subscribe to a service with hundreds of options? It remains to be seen what subscription services will become for the big games.”
Microsoft has argued that the additional monetization opportunities in games set it apart from streaming services for other media, such as video-on-demand.
Unlike video streaming platforms, Game Pass users continue to spend money via in-game transactions, content expansion, and purchase of additional games, the company said.
Microsoft CEO Satya Nadella claimed last year that Xbox Game Pass subscribers play nearly 40% more games and spend 50% more than non-members.